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What’s an SWP Calculator and How to Interpret the Results Using One?

Looking to earn a fixed amount every month by investing in a Systematic Withdrawal Plan mutual fund? Make sure to check out the withdrawal calculator to help you figure the right investment parameters that meet your financial requirements.

Among the plethora of investment choices out there, one of the best options that provide you with a fixed income monthly (quarterly, annually, or even weekly as per your choice) is the – Systematic Withdrawal Plan, known as the SWP, in short.

With an SWP, you can get a fixed amount to your savings account, just like you receive your salary on a set date, every month. To get started with this plan, all you have to do is invest a lump sum, in any one of the mutual funds of your choice and opt for SWP.

The SWP Scheme is ideal for individuals who are looking to get a fixed income every month, like retired people. For instance, say you invest a lump sum of 10 lakhs in a mutual fund of your choice and set up SWP instructions to transfer 5000 INR to your account, on the first of every month, until a particular period.

Since an SWP is an open-ended scheme, you can withdraw the remaining amount at any time, just by submitting a simple redemption form. Also, you have the flexibility to change or stop the SWP instructions at any time during the process. Similarly, if you feel like your expenses have increased, you can make an additional investment in the mutual fund and increase your withdrawal amount every month.

Now, coming to the big question, how do you determine how much to invest in the scheme, the withdrawal amount and other factors?

This is where – an SWP Mutual Fund Calculator comes into the picture!

What does the Calculator do?

It’s a handy tool that helps investors get a clear picture of how the SWP investment progresses during the tenure. With an SWP, you redeem a particular number of your mutual fund units every month. The calculator helps investors to estimate their withdrawals every month for a specific tenure.

You have to input the following data into the calculator:

SWP Amount – This is the amount you wish to withdraw every month (or every quarter). It depends on your expenses and other financial requirements.

Initial Investment – As the name implies, this is the amount you have to invest as a lump sum initially in the mutual fund scheme of your choice.

Withdrawal Frequency – This refers to the timeframe at which you would like to receive your fixed income. This can either be weekly, monthly, quarterly or annually, depending on your financial requirements.

SWP Start Date and End Date – This specifies the period for which you’ll receive fixed income to your bank account.

Let’s take a closer look at the working of the SWP calculator, using the following illustration.

Initial Investment Amount – 5,00,000

Withdrawal Amount – 5000

Frequency – Monthly

SWP Start Date and End Date – Apr 2013 – Apr 2018

Once you click on the “Calculate” button, you get a table with several headings. Using the table, you can find the total amount redeemed at the end of the tenure and along with the index value of the fund at this time.

By playing around with the withdrawal amount, initial investment amount, and SWP start and end date, you can get a clear picture of the working of the fund. This helps you figure out the right investment amount, which ensures you get a fixed sum every month.